Monday, October 31, 2011

Bank of America Launches ‘Test-and-Learn’ Short Sale Program in Florida

By: Carrie Bay 10/11/2011

Bank of America has begun a pilot program in Florida offering extra incentive payouts to distressed homeowners who agree to and successfully close on a short sale.
Incentive payments for relocation assistance range between $5,000 and $20,000. The program is being offered on a limited basis for investor-approved, pre-offer short sales.

Bank of America is calling it a pilot “test-and-learn” program.
A spokesperson for the bank explained that Florida is experiencing higher foreclosure rates than other parts of the country, and is therefore seen as a “viable market to gauge incremental short sale response and completion rates when presenting homeowners with relocation assistance at closing.”
If successful in Florida, Bank of America says the “test-and-learn” could be expanded to other states.

The short sale must be initiated between September 26 and November 30, 2011 and close by August 31, 2012.Florida homeowners who qualify for the “test-and-learn” program will receive a solicitation mailer directly from Bank of America, or may learn about the program if they are working with a real estate agent who handles pre-approved short sales for BofA.

The bank has a dedicated team of short sale specialists standing by to help agents determine if their homeowner client qualifies for the short sale relocation assistance at: 877.459.2852.
Bank of America has already been offering short sale payouts in the state of Florida, albeit for smaller amounts.Susie Kirkland with RE/MAX Southern Realty in Destin says she’s closed five transactions within the past couple of months through what BofA calls its Cooperative Short Sale Program. The bank awarded Kirkland’s short sellers $2,500 upon closing.

BofA is even extending short sale incentives to some investors. Steve Kravitz of Bankers Realty Services, Inc. in Fort Lauderdale just completed a short sale transaction last week on an investment property. BofA offered the non-occupant owner/seller $3,600.Kravitz says his client had been late on a few payments, but there was no foreclosure filing on the property.

BofA and other lenders are looking to short sales earlier on in the process, and getting ahead of the foreclosure crisis in areas where the system is already bogged down with distressed properties.
“We’ve had cases here where we’ve gotten short sales through where there haven’t even been any late payments at all,” Kravitz said. Kravitz says short sales just make sense for a market as hard-hit as Florida. Not only can a short sale be more cost efficient when lenders are facing a foreclosure timeline of nearly two years, but it “gets more product and better product out to buyers,” he says.
He explained that oftentimes, a foreclosure property can sit vacant for more than a year, whereas with a short sale, the home is typically occupied up until a week or a few days prior to changing hands, which translates to a better quality home in better shape.

Kravitz says banks are becoming “more cooperative” and approving short sales more quickly. The investment property short sale Kravitz closed last week took just 45 days.
Other lenders are also extending incentive payouts to short sellers in Florida and some other hard-hit states such as California.

In July, DSNews.com reported that Wells Fargo, JPMorgan Chase, and Citi were all offering extra relocation assistance to borrowers opting for a short sale in certain markets.
Robert Valenzuela with Century 21 Schwartz Realty in Key Largo, Florida, says he’s completed six short sale transactions in which the seller was given money to help with relocation, the largest of which was a $45,000 payment from Chase Bank.

Los Angeles had the nation's highest number of housing short sales in this year's second quarter, with Phoenix a close second, according to foreclosure data firm RealtyTrac.

Short sales totaled 9,145 in Los Angeles for the quarter, making up 25% of all sales with an average short-sale price of $350,237. Phoenix saw 8,434 short sales at an average price of $133,793, with short sales making up 23.4% of all sales.

RealtyTrac reported in August that U.S. short sales increased 19% in the second quarter to 102,407, up from 86,059 in the previous quarter.

Short sales made up 12% of all residential home sales in the second quarter, with nearly one-third of all sales at some stage of foreclosure.

Reno, Nev., saw the biggest quarterly increase in short sales to nearly 50%, making up about 30% of total sales.

Thursday, October 27, 2011

On, Monday, the Obama administration announced the implementation of far'reaching changes to boost the economy by allowing underwater homeowners to refinance their proeprties at today´s low interest.

There are certain requirements despite eliminating many road blocks. Press the link below to learn more about the HARP which was enacted in 2009 but so far only reached one tenth of the 5 million borrowers it was designed to help.

Tuesday, October 25, 2011

The Federal Housing Finance Agency, with Fannie Mae and Freddie Mac (the Enterprises), today announced a series of changes to the Home Affordable Refinance Program (HARP) in an effort to attract more eligible borrowers who can benefit from refinancing their home mortgage. The program enhancements were developed at FHFA’s direction with input from lenders, mortgage insurers and other industry participants.
Here are the details:

Thursday, October 20, 2011

Consumer credit analytics firm FICO (FICO: 25.96 +2.12%) said mortgage servicers need to take a more proactive approach to borrowers they feel are likely to strategically default on their mortgage. The prevention of future litigation costs, FICO said, is alone worth the effort.

"Within the current population, the goal is to spot likely strategic defaulters before a delinquency develops, enabling servicers to intervene early," FICO said Wednesday in a blog post.

Mortgage servicers should give potential strategic defaulters advice on other ways to relieve their mortgage burden such as a short sale or loan modification, the company said. Mortgage lenders and servicers have said they are more likely to seek a deficiency judgment if they perceive the borrower to be a strategic defaulter.

A Wall Street Journal review of hundreds of foreclosures in seven states found that the average amount by which foreclosure sales fell short of loan balances was roughly $100,000. The review found that 64% of the 4.5 million foreclosures since the start of 2007 have taken place in states that allow deficiency judgments.

Florida is one of the biggest deficiency judgment states. Since the beginning of 2007, it has had more foreclosures than any other state that allows deficiency judgments –more than 9% of the U.S. total, according to research firm Lender Processing Services Inc.

A growing national secondary market of deficiency judgments could lead to a bundling of those judgments into packages that resemble mortgage-backed securities, some investors say.

Strategic defaulters behave differently from traditional mortgage defaulters in that the former generally have higher FICO credit scores, exhibit better credit management behavior and live on the property for a shorter length of time and therefore are less attached to it.

Strategic defaulters can afford to make payments on their loan, but do not because they are "underwater," meaning they owe more on their mortgage than their house is worth. Traditional defaulters generally do so because they cannot afford the payments.

As a realtor helping homeowners with their situations, it is imperative that I am informed about the latest trend, policies affecting my clients. I rely on reports from Foreclosure Radar. Today I wanted to share with you some of the latest developments. Please click on the link below:

Wednesday, October 19, 2011

California State Attorney Kamila Harris bolted from talks with the nantion's five largest lenders to reach some settlement. Without California's participation, the plan to reach settlement in the $20 to $25 billion would be impossible.

The plan under consideration would make refinancing available to some borrowers whose houses are worth less than their loans, so long as they are current on mortgage payments, according to people familiar with the matter. Please click on the link below.

As expected, banks are in full gear to increase the foreclosure activities after a temporary moratorium. The number of default notices jumped 25.9 % from previous quarter. The reason is that banks have easier time filing in non-judicial states like California where foreclosure proceedings are shorter than judicial states.

Tuesday, October 18, 2011

The sale of properties repossessed through foreclosure may not peak until 2013, keeping home prices from a meaningful recovery for some time, analysts estimated Monday.

Nearly half of the more than 552,000 REO properties liquidated in the first half of 2011 were held by private banks. In the years ahead, the government — including the Department of Housing and Urban Development, Fannie Mae and Freddie Mac — will begin taking a majority of the activity.

In 2013, REO sales could reach 1.48 million properties, according to estimates from Bank of America Merrill Lynch analysts, a 10% increase from projected amount in 2012.
"We do not expect to see anywhere near the downward pressure on home prices that we had back in 2008, since the expected percent changes in liquidation volumes are so much smaller," BofAML analysts said. "But home prices are starting from a negative point, so the implication is that home prices will continue to decline as the foreclosures transition through the pipeline."

Most of the projected increase will come as the government begins to unload its backlog. The government-sponsored enterprises and HUD, analysts estimate, will liquidate roughly 595,000 properties in 2013 alone.
Total REO liquidations wouldn't drop below 1 million until 2015, according to BofAML.

The Obama administration began work[1] last month developing new strategies for selling this mass of properties, which may involve renting more of them. The Federal Housing Finance Agency is also working on a way[2] to refinance more underwater borrowers to entice them from walking away.
"I would essentially rent the house back to those who are living in them now," said Susan Woodward, an economist with Sand Hill Econometrics. "I don't think it makes a lot of sense to push 4 million people out of their homes when they're victims of a slower economy they had nothing to do with."

Other analysts were skeptical of anyone who could predict accurately what the GSEs or Washington would do, especially after the elections in 2012."Do they really think that the government under any administration would let 500,000 homes hit the market and crash prices all over again, six years after the first crash?" said Scott Sambucci, chief analyst at Altos Research.

He said even if unemployment improved by a full percentage point or two — which he said would be a stretch — the market would still struggle to meet such a supply influx."It would crash the market, so no, it'll never happen," Sambucci said.Daren Blomquist at RealtyTrac, which monitors foreclosure filings across the country, said the sale of REO is on track to reach 825,000 by the end of 2011.

"We do expect the REOs to pick back up in 2012 as lenders push through some of the foreclosures delayed by processing and paperwork issues," Blomquist said, adding the inventory needed to be sold could reach well into the millions.If half of the 800,000 mortgages currently somewhere in the foreclosure process and another half of the 1.5 million loans in serious delinquency end up REO, it could mean an additional, 1.15 million properties that would need to be liquidated — not including new foreclosures that enter the process, according to RealtyTrac.

"That's very possible given continued high unemployment rates and high underwater rates," Blomquist said. RealtyTrac estimates roughly 27% of all outstanding mortgages are worth more than the underlying property.
Woodward said refinancing borrowers, in negative equity or not, down to current market rates could result in a total savings for U.S. households at $250 billion annually. When asked if private investors would return to fund the future mortgage market after such a radical change, she said they would.
"I think the whole world would see this as a one-time fix. We did similar extreme things during the Great Depression," Woodward said.
Investors themselves, though, showed little confidence they would take on such a risk again. In fact, most are trying[3] to keep the government involved in the housing market for the future, to keep risks as low as possible. Otherwise, foreign investors would flee.
While the estimates on how many REO will be sold in the future are extremely difficult to nail down, the size of the best projections share a common and threatening scale. Analysts said major refinancing schemes or new strategies for liquidating REO on a local level would need to be completed soon to rescue house prices from the still increasing pressure of mounting foreclosures.
"The need for policy support would therefore be considered urgent," the BofAML analysts said.

What Kind of Properties Qualify for Protection under the amendment to C.C.P 580e under SB 458:
This deficiency judgment prohibition applies to a broad category of 1 to 4 residential units with exceptions noted below. It applies to:
•Cash-Out Refinanced loans
•Non-Owner Occupied Homes
•Second Homes
•Vacation HomesAre There Exceptions to C.C.P. section 580e? (SB 458):
Section 580e does not apply in the following circumstances:

Where debtor is a corporation, limited liability company, limited partnership, or political subdivision of the state. C.C.P. 580e( d)(1).

Where debtor engages in fraud in the sale or waste of the property C.C.P. 580e( c).

A lien secured by a bond as specified; a public utility lien; and additional rules apply if a note is cross-collateralized by more than one property. C.C.P. 580e(d)(2).

For other exceptions that may apply to your specific factual scenario, speak to a lawyer.

Thursday, October 6, 2011

Foreclosures Forecast to Hit 15 Million Homeowners

By Kevin Chiu

The foreclosure crisis has produced an overpowering series of affects across the U.S., destroying businesses, taking away livelihoods, tossing millions of homeowners out of their homes and pressuring home prices in the over-whelming majority of neighborhoods lower.

The crisis, first forecast by Housing Predictor almost five years ago as the first real estate research firm to forecast the mess, has had a devastating impact on the nation’s economy and sent 45 million Americans into unemployment. An estimated 7.6-million residential properties have been foreclosed since the crisis started, with another 7.4-million foreclosures forecast through 2016.

Banks, mortgage companies, state and federal loss mitigation programs and moratoriums delayed foreclosures in 2009 through early 2011 before formal foreclosures were sped up. Attorney generals representing 47 states with the U.S. Justice Department are still negotiating with the nation’s six biggest banks to work out an agreement on foreclosures that were mishandled in the robo-signing scandal. Bank servicing employees admitted to making at least hundreds of thousands of forgeries on foreclosure documents.

Foreclosures were first concentrated in poorer neighborhoods made up of mainly subprime mortgage borrowers, but it didn’t take long for the crisis to spread to the mainstream of conventional mortgages, increasing our foreclosure forecast.

As the foreclosure crisis broadens to include more areas of the country, all sorts of homeowners are falling into its trap from a wide array of incomes, races and cultures. This epidemic like the mortgages that produced it doesn’t discriminate based on race, creed, income, national origin or background.

Foreclosure reports from data firms vary, but roughly two-thirds of current foreclosures are confined to the ten hardest hit states, which include California, Florida, Nevada, Arizona, Ohio, Alabama, Georgia and Illinois. But as the crisis drags on, Housing Predictor forecasts the concentration of foreclosed homes will expand to include more states as economic hard time’s impact more areas of the country.

Almost one-in-three homeowners are without any home equity or are on the brink of being underwater on their homes. For millions the dream of home ownership has turned into an American nightmare. Job losses and especially high unemployment in the majority of the country are hurting the housing market.

The Obama administration has implemented a series of programs to aid the market. Mortgage modifications, which are the only real step towards a healthier housing market have been completed for nearly 5-million homeowners, 80% of which have been by banks and mortgage companies not associated with government programs.

The battle to resolve the crisis and produce a foreclosure forecast that is more positive for the U.S. is likely to be delayed for years as politicians, divided by party lines and backed by special interests fail to do their jobs for the electorate as elected. A new mortgage finance system would go a long way in bettering economic conditions.

Congress has become so overly concerned about destroying the other party that the entire nation is suffering as members of the House and Senate pick-up record pay-days from special interests, including bankers and Wall Street to run their campaigns. Things have to change before the housing mess can possibly be straightened out.

Tuesday, October 4, 2011

Foreclosure starts rose 20% in August from the prior month to the highest level of the year and mortgages facing foreclosure are delinquent an average of 611 days, the highest level yet.

Lender Processing Services' (LPS: 13.225 +0.88%) mortgage monitor report for August showed foreclosure starts fell more than 12% from a year earlier, and the national delinquency rate is 8.13%, which is 2.5% lower than the prior month.

In late August, the Federal Deposit Insurance Corp. said the combined delinquency rate on mortgages held by major banks dropped to 6.68% in the second quarter, the lowest level since the third quarter of 2009.

First-time delinquencies accounted for nearly one-quarter of new delinquencies in August, according to LPS. And 23% of the nearly 46 million loans that were current at the end of August are at risk of foreclosure due to negative equity.

LPS said more mortgages moved back into delinquent status from foreclosure in August than ever before, "suggesting that process reviews and potential loss mitigation activity are continuing."

The company said the average delinquency process in non-judicial states is about six months shorter than judicial states, where backlogs remain extremely high. LPS said loans delinquent more than 90 days declined to 2008 levels in August.

Florida, Mississippi, Nevada, New Jersey and Illinois had the highest percentage of loans in delinquency or foreclosure. The states with the lowest rates of non-current loans were Montana, Wyoming, Alaska, South Dakota and North Dakota.

Sunday, October 2, 2011

The above graph is the graph from Credit Suisse that has many people nervous (especially in the financial sector) and squirming in their chairs. It displays the 2nd wave of adjustable rate mortgage (ARM) resets coming straight at us this year and next year. California is particularly vunerable since almost 60 % of this type of loan were sold for new purchase and refinance.

The reason behind the popularity was that people did not need the fixed 30 year mortgage since people moved or refinanced every 3 to 5 years so many homeowners traded the secure mortgages for low teaser rate yet dangerous offers "to cash out their equity".

Not only ARM was popular but the option ARM was also widely embraced by homeowners because it allowed the borrowers to pay less than the interest payment thus accruing negative equity. These are the loans that are almost impossible to modify or become impractical since payment can't be reduced. From the graph, one can easily tell the higher proportion of option ARM loan that is about to be rest. Only after the end of 2012 the reset declines.

The first wave of ARMs adjusted in 2007. This year 2011 is the year that large amounts of loan known 5/1 will be reset.Close to $ 500 Billion in Option ARMs is scheduled for reset. The exact date might not be accurate as banks try to modify some of the loans by postponing thru forebearance and beacuse home do not foreclose overnight. On average ,a foreclosure takes more than 12 months.

According to latest survey, there are more than 11.1 Million homeonwers (some source says is close to 15 M) with a mortgage that is negative in equity (underwater), meaning their house is worth less than the loan balance. They cannot sell, they cannot refinance, and there seem to be no solution.

The significance of this impending reset is that the additional homes with ARMs scheduled for foreclosure and the additional shadow inventories(estimated at 2 Million units) will further depress home values. It is estaimated that for every 5 % decline in home values, an extra 300,000 homeowners will be negative in quity or upside down.

If the homeowners can't cure the default by paying the balance the bank will eventually foreclose on their properties. It is important for homeowners to work with properly trained agents to assist them with the short sale.

Saturday, October 1, 2011

The number of Americans struggling to make their mortgage payments is at traditional highs, while properties remain at high levels of negative equity.

Popular strategies for helping distressed borrowers include mortgage modification and refinancing, to name a few. But at the largest mortgage player in the nation, Fannie Mae, there is one option that the government-sponsored enterprise has no plans to use.

Michael Williams, the CEO of Fannie Mae, tells HousingWire magazine that the firm will not ask mortgage servicers to reduce the principal on distressed loans.

"We do not do principal reduction," Williams said. "When we look at the toolset that we bring to the table, we really look at the interest rate, term and then forbearance of principal but not forgiveness of principal."

Williams joins the CEO of Freddie Mac, Charles "Ed" Haldeman in the resolve to pursue loss mitigation strategies, such as mortgage modifications. Both men disclosed this information in separate interviews with HousingWire magazine.

Both CEOs refer to foreclosure as an option of last resort, something that is ultimately in the best interest of the American taxpayer, they say.

"We have found that majority of the borrowers that we are dealing with have a challenge in meeting their monthly payment," Williams said in reference to actions at Fannie Mae, "so what we want to do is put them in a modification that really gets them to a point where they can afford the payment."